Our Mission is to keep our audience with an interrupted stream of financial information from serious sources, with the objective to provide the tools and the sufficient knowledge about investments in the financial markets.

Translate

Search This Blog

Search Tool

Sep 24, 2018

Bonds & Fixes Income at Close: 2-year Treasury yield hits 2008 high after Draghi warns of inflation I CNBC

The yield on the benchmark two-year Treasury note
hit its highest level since 2008 on Monday after European Central Bank
President Mario Draghi highlighted an uptick in underlying inflation in
the European economy.
The two-year rate hit a high of 2.842
percent in early trading, its highest since June 25, 2008, when it
traded as high as 3.014 percent.
"Underlying inflation is
expected to increase further over the coming months as the tightening
labour market is pushing up wage growth," Draghi said in a speech. "This
stable profile conceals a slowing contribution from the non-core
components of the general index, and a relatively vigorous pick-up in
underlying inflation."
The yield on the German bund rose 5 basis points at 0.51 percent after the ECB president's speech.
The yield on the benchmark 10-year Treasury note
held around 3.081 percent at 1:17 p.m. ET, down from a session high of
3.098 percent, its highest level since May 18, when it hit its 2018 high
of 3.128 percent. The yield on the 30-year Treasury bond was up at 3.217 percent. Bond yields move inversely to prices.
Yields also climbed Monday morning after a report said Deputy Attorney General Rod Rosenstein would resign from his position.
The White House clarified
later in the day that Rosenstein will meet with President Donald Trump
on Thursday to discuss recent news reports that the deputy attorney
general once suggested taping the commander in chief.

"I think the market dropped a little bit on
Draghi's comments, and the German market did for sure," said Arthur
Bass, managing director of fixed income at Wedbush Securities. "ECB
officials have talked about tapering later in the year, and that the
underlying inflation inflation index is expected to pick up."
Analysts are also expecting the Federal Reserve to announce a quarter point rate hike Wednesday,
and will be paying close attention to the event to see if the central
bank provides any signals where monetary policy is heading.
Though the Fed is widely
expected to hike its benchmark funds rate during the meeting, markets
will be looking past this month's decision and toward the direction the
Fed will chart ahead.
The Federal Open Market
Committee's meeting is due to take place on Tuesday and Wednesday. Fed
Chairman Jerome Powell will likely discuss the strengthening economy,
competitive labor market and burgeoning inflation at a news conference
afterwards.
A quarter-point bump to the Fed's benchmark rate is already factored into investor forecasts. The hike will push the funds target to 2 percent to 2.25 percent, where it last was more than 10 years ago.
"I think you're going to
be looking at two things with respect to the Fed meeting. The first is
whether they have the word 'accommodative' in the statement," added
Wedbush's Bass.
"The dot plot is going to
be the other thing to look at," he continued. "I think it's more likely
they increase. We've been locked in a trading range since May, but I
bet people come out of the Fed meeting feeling more bearish."
The dot plot displays
expectations from individual FOMC members about the direction of
interest rates, which in turn will help determine the direction of
markets.
Members of the FOMC are
grappling over how much more monetary tightening is necessary to keep
the economy (and inflation) healthy. Up until now, most officials have
been comfortable with the Fed's slow-and-steady rate hikes and unwind of
its massive balance sheet.
A flattening of the
so-called yield curve has some economists nervous as spreads between
short-term and long-term debt rates shrink to lows not seen since before
the 2008 financial crisis.
An inverted U.S. yield curve — where short-term rates surpass long-term rates — has frequently heralded upcoming recession.
Just last month, the
spread between the 10-year yield and the two-year yield hit 19.75 basis
points, its lowest level since August 2007. The spread between two-year yields and 10-year yields was last seen at 25.91 basis points.
The Treasury Department
auctioned $37 billion in two-year notes at a high yield of 2.829
percent. The bid-to-cover ratio, an indicator of demand, was 2.44, the
weakest print since December 2008. Indirect bidders, which include major
central banks, were awarded 40 percent. Direct bidders, which includes
domestic money managers, bought 13.4 percent.
Global markets remained jittery on Monday as fresh tariffs that target products in the U.S. and China kicked in and negotiations between the two economic powerhouses appeared uncertain.
Washington inflicted 10
percent duties on $200 billion worth of Chinese goods; this is set to
rise to 25 percent by year-end. China has retaliated, targeting duties
on more than 5,000 American goods worth a total of $60 billion.
The Wall Street Journal
first reported that China has canceled planned trade discussions with
the U.S. as both sides escalate their dispute in the wake of a new round
of tariffs.

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

FRAUDE DE LOS BANCOS-PERÚ

If you are are investigating a fraud case and need to contact MasterCard to assist with the investigation. Who can we speak with?

A: Please send an email to our Law Enforcement Support Center at Law_Enforcement_Support@mastercard.com, or call 1-866-308-7272 (U.S. & Canada) or 1-636-722-4046 (International). We will respond to your inquiry within 24-48 hours.